Key Takeaways
- A 51-year-old who retired early this year planned his family’s 2027 income to land near 380% of the poverty line, until his son, a tax dependent, got a job that may pay $50,000.
- For the Premium Tax Credit, household income includes the modified AGI of each dependent you claim who’s required to file a tax return.
- The son’s pay would push the family well past the $109,000 the poster puts at 400% of the poverty line, where the credit ends, and for tax years after 2025, advance credit has to be paid back in full.
- If he skips a $55,000 72(t) withdrawal and lives on cash he’s already saved, the family gets back under the line with some room to spare.
If you retired early and buy your health insurance on an Affordable Care Act Marketplace, you probably keep a close eye on your income already. What’s easy to miss is that a grown kid’s paycheck can count toward it too. With the 400% cap back in force this year, that can cost a family its whole Premium Tax Credit.
A 51-year-old who retired this year is in that spot, as he wrote last week in a post in Reddit’s r/Fire forum. He’d mapped out next year’s income with care, and then his son got a job.
A $50,000 job lands on a careful plan
The poster’s plan for 2027 had four pieces: $55,000 from a 72(t) withdrawal, $15,000 of dividends and interest, about $10,000 of net rental income and $20,000 to $25,000 of gains from selling stock. Together, that’s $100,000 to $105,000 of income. He says that comes to around 380% of the federal poverty line for his household of three. Then his son, whom he claims as a tax dependent, lined up a spring and summer job that may pay about $50,000 next year. The son keeps the money, and the poster hopes that means his son will cover his own expenses for half the year. As he put it, “it is an overall good problem to have.”
6 safe dividend stocks paying retirees 6%+ yields
There are over 100 stocks paying 6%+ annual dividends today.
But after an extensive investment review leveraging TIKR’s proprietary data, we now believe only six of them are truly safe for retirees.
They’re all yours for free as part of our new investment report, which you can access right here.
His son’s pay counts if he has to file
For the Premium Tax Credit, household income is your own modified AGI, plus your spouse’s if you file jointly, plus the modified AGI of each dependent you claim who’s required to file a federal tax return. A dependent who files only to get back withheld tax doesn’t count. At $50,000 of pay, the son would be well past the point where he has to file, so his income goes into the family’s total.
That total matters a lot more than it did a couple of years ago. The IRS gives the credit only to households with income between 100% and 400% of the poverty line for their family size. Congress lifted that cap only for tax years 2021 through 2025, and as of this week, no law brings it back for 2027. Open enrollment for 2027 coverage is under way, and each year’s eligibility is based on the poverty guidelines most recently published as of open enrollment’s first day.
Over the line by $41,000 or more
Add the son’s $50,000 to the poster’s $100,000 to $105,000, and the family’s household income comes to $150,000 to $155,000 next year. That’s $41,000 to $46,000 above the $109,000 the poster puts at 400% of the poverty line for three. Above that line, the family gets no Premium Tax Credit at all for 2027.
The timing makes it worse. The family has to choose its plan and any advance credit before the son earns a dollar of that pay. Since there’s no repayment cap for tax years after 2025, the family would have to pay back every dollar of advance credit on its 2027 tax return. The poster doesn’t know yet how big that bill could be, and he’s nervous. His state runs its own exchange and hadn’t released its 2027 rates when he posted.
Swapping the 72(t) for cash
Fortunately, he has a way out. He plans to delay the 72(t) and pull the same $55,000 from the two years of cash he’s built up instead. Spending cash he’s already saved doesn’t add to his income. So with his son’s pay included, the family’s total drops to $95,000 to $100,000, which is $9,000 to $14,000 under the $109,000 line. “This will perfectly balance my kid’s income from MAGI standpoint,” he wrote. If that’s not enough, he has backups: paying himself back from his HSA for his COBRA bills, pulling out his Roth IRA contributions and using his son’s 529 plan for the son’s fees and rent.
Frankly, I think he’s got it right. When one dollar over 400% costs the whole credit, cash already in the bank is the cheapest money he has for 2027. I’d also keep his stock sales near the low end of his range until his son’s last paycheck is in, since that $50,000 is still an estimate. Once his state posts its 2027 rates, he’ll know exactly how much credit that cushion is protecting.
Enjoy your retirement in style with these safe 6%+ dividend yields
Dividends can hold the key to enormous wealth. But only if you buy the right ones.
Picking the right high-yield dividend stock can be the difference between a dream retirement…and scraping by every month, waiting for the next Social Security check to clear.
We’ve identified six stocks yielding 6%+ that we believe every retiree should know about right now.
Disclaimer:
Please note that the articles on TIKR are not intended to serve as investment or financial advice from TIKR or our content team, nor are they recommendations to buy or sell any stocks. We create our content based on TIKR Terminal’s investment data and analysts’ estimates. Our analysis might not include recent company news or important updates. TIKR has no position in any of the stocks mentioned. Thank you for reading, and happy investing!
